Aston share price likely to keep climbing

Aston Resources
has been one of the great success stories of the past 12 months and, according to brokers, its share price could make for even better reading in the months ahead.

Since listing in August last year, Aston’s stock has gained about 75 per cent, in the process making
Nathan Tinkler
Australia’s youngest billionaire.

Even bad news has failed to dent investor enthusiasm for the stock. On Thursday the company announced it has pushed back its forecast for development of its flagship Maules Creek coal project in NSW’s Gunnedah basin. Because of delays caused by a change in the NSW government, it now expects production to commence in the first quarter of 2012.

But on Friday, its shares were up more than 2.5 per cent on Friday and briefly hit record intraday highs of $10.50.

UBS wasn’t put off by news of the development delay, affirming its “buy" rating and $12 price target, which implies gains of more than 20 per cent over the next 12 months.

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The broker said the delay didn’t constitute a downgrade relative to its estimates, which were already conservative. It had already forecast production to begin in 2012, for a total of 2 million tonnes, compared to the company’s estimate of 5 million tonnes.

The broker said it continues to favour coal developers over producers because they are less exposed to coal prices in the short term, and also because they stand to benefit from continued corporate activity in the sector.

Deals have featured prominently in the coal sector in recent years. Among the more high profile transactions include China’s Yanzhou Coal buying
Felix Resources
, and Singapore’s Noble Group buying a controlling stake in
Gloucester Coal
, both in 2009, and Thailand’s Banpu snapping up
Centennial Coal
last November.

That has left Australian investors with few avenues to gain exposure to coal. Of the names still left,
Macarthur Coal
’s register is heavily tied up in the hands of three shareholders, Chinese state-owned investment company CITIC and steelmaking giants ArcelorMittal and Posco, while
Whitehaven Coal
has been the one exception to the wave of corporate activity that has swept through the coal sector, recently going through an unsuccessful sale process.

Which brings us back to Aston - easily the best performing coal stock this year, with shares up more than 24 per cent, compared to declines of about 13 per cent for Whitehaven Coal and about 11 per cent for Macarthur Coal.

It’s not just UBS that sees the share price going higher. Five of the six broker surveyed by Bloomberg have outperform ratings on the stock, with an average 12 month price target of $11.93.